Maha Energy AB (publ)

Hello and welcome to Investor Update, today with Maha Energy, who released their annual report for 2024 this morning. CEO Kjetil Solbrekke will be on the link from Caracas, Venezuela, together with Roberto Marchiori, the financial manager and also he on the link, but from Rio de Janeiro. Present the results and current events during the first quarter. You who watch live can, as always, interact with the management by asking questions in the chat box. I suggest you start doing it now and I can see that some of you have done it. And you who don't get answers to questions, or who don't get answers to questions, can go back to the company. So with that, I will move on to English. Kjetil, Roberto, how are things in Venezuela, respectively, in Brazil?

No, I think, well, first of all, a pleasure to be here again, talking to you and to the market. And no, things are very nice in Caracas. I managed to get a cold, but it's more spending time in meeting rooms with the Vesa negotiating our technical plan for the future than anything else. So no, things are, Caracas is actually very calm and nice.

Okay, cool. And Roberto, we can hear you loud and clear, I guess.

Yeah, no, same here in Rio. Thank you, Caracas. Thank you, everyone. It's a pleasure to be here again with you.

So without further ado, let's go through the results. So please, go ahead.

Okay, thank you for this, Cargo. So I will start out, as usually, with an update on where we are more operationally and what we're working on, and then hand it over to Roberto. I apologize for the call. I might cough a bit, but I hope that doesn't interrupt too much of the presentation anyway. So if we go to the first page. So basically, I don't want to repeat everything that we have done over the last 24, 18 months. Just highlight the fact that we are in the fourth quarter, we lied to the oil price. That meant that we could get the earnouts into the Pedro Concavoor deal, $4.4 million, which is now part of our cash going forward. And of course, I'm very happy then to also announce that we have now reached the end of the discussions with PDVSA on the Mesa Tecnica. What does that really mean? I'll come back to that in a moment, but it's a very important milestone for us. And I'm super happy to have reached that goal in a very short time compared to the plan. The PDVSA thought we had zipped until end of May, and we have now been able to reach this goal already by the end of February. To the next page. And next one. So this is what we are talking about, of course. And we have talked about this several times. You know where we are. We are working on La Paz and Mara. Mesa Tecnica is basically a process together with PDVSA to outline the business plan, the development plan, redevelopment plan, you can call it many different things. And we are basically now just revised the existing one and agreed upon new profiles for gas, oil, water production, opex and capex. There are still some small, small adjustments that are being basically checked. And they are very rigorous in their process. But the fact that we now have a combined understanding of what the field can do says a lot. And I'm very happy with the numbers as well. What we have done over these Mesa Tecnica is to provide PDVSA with detailed information about how we think we should produce the remaining oil in these reservoirs. And they have basically bought into our story, bought into our detailed explanations. And we have gone well by well. So you see a total of more than 150 wells that have been studied and now is part of the plan. I would have to say that, of course, we always start somewhere. So the first two years is about really 20 wells. 20 to 25 wells that we have identified. And we'll see how quickly we will get them on stream. Five of them, five of these are the ESPs that I've talked about that has an enormous potential that will be tested. So all this will be a two-year test period before we really ramp up and further increasing the production. But PDVSA wants to have a full presentation of the potential for the remaining time of the concession period. And that's quite okay with us as well. It demonstrates a bit of the potential. I would say this is not a super optimistic view. I think this is actually a bit conservative on some of the single well opportunities that we see. And again, in alignment with PDVSA. So what we see is that we are able here to identify resources that we can produce 90 million barrels of oil in the remaining period we have. And about 180 billion cubic feet of gas, which is the equivalent of another 30 million barrels of oil and gas. We have estimated the top production to be approximately 40,000 barrels of oil and gas equivalents per day. Oh, there you go, sorry. And the first... During the first years, we will, as I said, be focused on testing. And then take this decision to really ramp up and continue after the first two years. Reminding you, Ben, again, everybody, we are close to Chevron in Boscan. We're continuing the dialogue with everybody there. But right now, what we have reached is a common understanding together with PDVSA on how to develop this field, how much resources we have here. And I'm very pleased with basically saying that the PDVSA people have understood our ideas and agree to our approach and agree to the numbers that are now in front of us. So now we have a concrete plan, and this is what we're going to deliver on going forward. So next page. This says a bit about what is really... Okay, what are the next steps now? We have basically now concluded on the Mesa Technica. What's going to happen now is that we will start up negotiations on what kind of contracts we can operate under. That will be a contract for an operating regime, how we will operate in combination with PDVSA, how we can sell the oil. We also want to sell the gas. As you saw, gas is 30% of our products. So this has been important. We have received positive signals on this, but signals is one thing, the concrete contract is not. So that's why we have to do the work now going forward. And our model is, of course, that we want to have similar type of contracts as Chevron and Morebprom operates under today. They have been very successful for Venezuela and for the companies, and that's our target. Then, of course, I'm sure there will be questions around it too. The next thing we miss is, of course, also a license from UFAC, from the Ministry for the State Department in the US. And, of course, with the new administration in Washington, we have not yet been able to have any meeting, not yet been able to get any signals. We have a very close dialogue with several other partners in Washington, companies in similar positions as ourselves. So we have, in a way, good reason, I think, to actually expect that this could happen. That's a personal note, because I think we have seen the new administration being very eager to make deals, to basically try to negotiate favorable terms for Americans, American companies, and so on, to do business. So that's what we hear, that's what we believe. But, of course, yesterday's news from Trump, you know, makes everybody have a question. But, well, we have seen that before. So we can continue to discuss that a bit, perhaps under the Q&A. But basically, this is the way forward. We need to, for us today, it doesn't really matter much. We need to discuss and agree upon the terms with PDVSA for operating. And we don't see ourselves starting operating here before June, July, August, the very earliest anyway. So that's basically our way forward. But let's go to the next one. And the next. So, BRAVA is also an area where I know there has been a lot of question marks. We are now, I would say, overall, that I am still focusing on the underlying values of what is in BRAVA. It's been a very bumpy ride, and I have received lots of concerns from shareholders directly to me. And I understand all of those concerns. But I will still repeat what I have said before. I do strongly believe in the underlying values of BRAVA. There was uncertainties about Atlanta FPSO coming to... Starting up. It now has started up and it's working. And there will be more wells connected. They will also work. We have very limited concerns when it comes to anything on the reservoir in both of these fields, and especially now Atlanta, as I'm talking about. And the FPSO has already proven to work. FPSO and Papatera have been through lots of maintenance. There are still issues to be fixed, but also the FPSO. I've been there myself twice. I am very confident that this machine, call it that, the FPSO is going to work fine. But there will be more need to do repairs. The current issue they have is linked to the gas compressor in order to re-inject gas, because they are not allowed to flare all the extra gas they are producing. The extra gas comes because they are producing high volumes of oil. So it's a good signal, a good problem. But of course, we want also the FPSO and Papatera to deliver the full capacity volumes, which will be in the order of 20,000 barrels per day. Another thing is there's a lot of initiatives now to hybrid the portfolio. There have been some messages already of very small transactions that are basically meaning that they are cleaning up in their portfolio. I think this is a very good sign. I think it's a thing we have been requesting, been supporting. It means that they should focus on the important assets to deliver more value to the shareholders. So I remain very bullish on BRAVA. It's been a bumpy ride. It's not that easy to sit and say, well, it's going to be fine. But that's really what I do believe. I think Atlanta, Papatera, Portugal, these are great assets. And now we just have to expect and push also the management to stay focused, which I think they are, on delivering these volumes to the market and increase the cash flow. Next one. And next one again. So Illinois, it's going fine. We are producing a lot more now this quarter than last quarter. But this is also driven very much by exactly the timing of the wells and so on. But it's a nice operation. We have proven to drill successful new wells, added reserves, and created an additional good cash flow for the company. Let me also say something very important here. The work we are doing in Illinois is exactly what we also will do in Venezuela. So here we are demonstrating a very efficient operation of something that we are exactly the same type of operations. We're going to start up in Venezuela. And I'm actually also in dialogue with the people there to see if they are flexible. And I can assure you that we will get good support from the competence that the company is building and has built over a long time in the operations in Illinois. And I think also with the current administration in Washington, it's an important part of being Baja, applying to get the licence in Venezuela. The fact that we have a significant operation in Illinois. So very pleased with the activity, very pleased with the wells that have been drilled, very pleased with our guys that are working there day and night to deliver these values to our shareholders. And I'm also very pleased to say that I think this is super relevant for what we are doing also in Venezuela. So with that, I think I'll hand it over to you Roberto. So then I can sneeze a bit over here.

Thank you. Thank you, Getu. So going to the next slides, please. One more. So here we are showing the production revenue evolution. So as Getu was mentioning, we increase our production around 130% when compared to last year. Of course, you can see in the last quarter of Q4, this ramp up after the completion of the drilling programme. And also this in terms of revenues also have this increase on more than 100% if you compare to last year, last quarter. An increase of around 30% quarter over quarter, in spite the lower price environments. Going to the next slide, please. So here we show the production profile. We can see we have stable production, even we increase a lot in terms of the production. So our OPEC's are pretty stable, as we can see in terms of OPEC's per barrel in dollars. So we have this decrease of around 30% in the metric. And as a consequence, we have this operating netback in terms of dollars per barrel. And we increase our netback of more than 100% as well, if you compare to last year. Going to the next slide, please. Here we are showing the GNA and EBITDA evolution. Basically we have our GNA, we are working hard to reduce this quarter over quarter, but of course we have these effects of the potential M&As, all the legal consultancies we have during these operations and transactions made in the past. We hope this will decrease over time. So we have here a decline of around 150% if you compare to last quarter, last year. And we end up the quarter with this EBITDA negative of $3 million in last quarter, 2024. Going to the next slide, please. Here we have the net financial result and the net results by the quarter. Basically we have unrealized gain in BRAVA shares of around $12.6 million affecting positively our net financial result for the quarter and of course impacting also positively our net result on almost $10 million. And going to the next slide, please. Here we show just a breakdown of the CAPICs. So we have a minor CAPICs during the quarter because we already completed the last trading program. And we end up the quarter with more than $10 million in available cash. Also we have additionally on top of that around $87.5 million of liquid investment which is basically BRAVA shares in three-hour for the venture. And now we are a zero debt company. We are debt-free after prepaying the debt during the quarter to avoid addition or higher interest expenses going forward. And here we have the chart on BRAVA share performance in US dollars where basically we have a positive increase of around 18% during the quarter. Going to the next slide, please. Here we have the cash flow breakdown. So we started the quarter with around $88 million of net cash plus liquid investments. And we end up here the last quarter of around $97.6 million which were basically impacted by the repayment of our debts and also the unrealized gain appreciation on BRAVA shares. And additionally, as Gertrude already mentioned, we expect to receive during the first quarter of 2025 $4.4 million of the brains earned out from Petro Concavo and also additionally $200,000 of dividends of our Bolivian gas pipeline investment. So we will end up in a pro forma basis with more than $100 million net cash plus liquid investments boosting our capital structure and be a solid position for growing Venezuela and potentially other M&A's. So going to the next slide, please. So here we have the closing remarks. So just again, we have a strong enhanced capital structure with more than $97 million in liquid investments and cash. We will receive an important amount of $4.4 million of earnouts. And now we have this zero debt company ready to boost growth. And also looking forward, as Gertrude were mentioning, we are happy we concluded the technical discussions with PDVSA on the business plan of Petro Daniela. We also will start the negotiations with PDVSA during this quarter, the first quarter of 2025. So we are targeting the same framework agreements as Chevron and Marupram already have. And in parallel, we will still be working with OFA clients as another approval so we can start operations as soon as we get it. And of course, as Gertrude also mentioned, we will be still working with Brava Shareholders so we can push this agenda to focus on the existing and most important core business and also the leveraged company so they can be prepared to start paying dividends across the way. And also, of course, we are always looking for selectively opportunities in Latin America so we can bring more value to our shareholders. So I think that's it. Thank you. And here we close the presentation.

Well, Roberto and Keatil, thank you. And as you can imagine, there is a lot of questions coming in and I will try to restructure them in an orderly fashion here. So I was just going to start with a couple of questions relating to the result and then we can jump into Papaterra. And obviously, I think that the elephant in the room would be Venezuela, although I'm not so sure that we can get a proper answer on every counts. But I'll start here with the administrative expenses amounted to 2.56 million in Q4 and 8.2 million for the full year. And the question here is really what's driving these high costs, especially considering the company is now debt-free and has reduced operational activities. And then I can add one other question into this, is the administrative costs seem from extraordinary consulting fees. So could you please walk us through that and what can we expect going forward?

Maybe I should start a bit on that and leave Roberto to potentially go through some more details. But I think the first thing I would say is that we... We have somewhat... I don't know whether it's conserved, I think it's how it's perhaps supposed to be. But basically, all the costs linked to the work we're doing here in Venezuela, for instance, is looked at as DNA. So I'm spending most of my time here. And most of our... Well, Roberto can go through that. The significant part of our cost is actually linked to the preparation we're doing here. So in a normal sense, I would say that this should have been activated costs because it's not really cost of running the company as it is. It's a preparation to operate a fantastic project in Venezuela. And that's a commitment where we actually do spend significant amounts on this. However, I think it's not... Not more than what I think is actually... I think we're also doing that very cost-affordable. But that is also linked to some of the special consultants fees because we basically have used extensive, very, very good consultants to be able to demonstrate these kind of volumes. Going through 150 wells, well by well, understanding the potential of this and changing the whole production strategy for Venezuela, that doesn't come by itself. And that's where we basically see a lot of cost. And these costs, I understand... I've been actually challenging counting and Roberto a bit. I think this cost should have been activated because it's part of preparing for a project. And apart from that, I think we are back to what Roberto said. We are working hard. There are also some old funds, to put it that way, coming. There's still work going on with the closing of the deal in Oman. It has to take some time. All of those things are actually also driving some of the costs. And so there's always a bit of things that are linked to the history. We try to close them out quickly, but that is still kind of influencing our cost levels. But we do have lots of initiatives. I think Roberto has actually done already quite a lot of work on reducing the cost, and I know he's continuing to pursue that. So the rest is sure that it's not something we don't think about, but something we are working very hard on. But maybe I have some more details on that, Roberto.

Thank you, Gigo. I think you covered the main topics. I think part of our current costs are related to Venezuela. We have a technical team there discussing all these assumptions with Jethro, preparing all these business plans. And we are always focused on trying to identify new opportunities of cost savings. So for sure, our agenda here is to try to reduce this even more going forward.

Thank you for that. And we have a couple of questions related to shareholder value and share buybacks. Your share buyback programme was initiated in 2024, I believe, but it was only 1.5 million shares repurchased. Do you plan to accelerate buybacks to support the stock? What's the thinking there?

Yeah, so that's a question that always naturally comes up. So I can only say that the programme is there, and it's not something we have cancelled. And we have every... on a weekly basis, a dialogue with the board on how we continue this programme. So, yeah, that's basically all I can say. It's not been cancelled. And you will see if we... Again, there's been a long period of time where we have considered not to buy, and won't go into the details of all these things behind that. I think maybe it explains by itself. But I think also now it's not been cancelled, and it's something that we are discussing every week, and we just have to follow up on that later.

And could I just have a follow-up question there and try to be the devil's advocate here? Now that the company is virtually debt-free and the Brava holding... well, appreciated and being booked as a short-term asset for Maha. And if I understand that correctly, that means that it can be liquidated within a year. Shall we see this as a possibility of building up a war chest for buying assets? And if so, is there any geographic area or is it opportunistic? So two questions in one here.

Okay, I think... Of course, we're optimistic. I think also it's clear that our focus is Latin America. That's why we feel we have a competitive advantage. But I think it goes without saying our largest shareholder is a private equity special situations firm. So of course, it lies in their blood to look at special situations. And of course, they are pushing ideas, pushing things to us continuously. So yes, I think we will be optimistic. We will look for the values. And of course, we are... I mean, our biggest shareholder is basically in this to create value for himself. And they have been constantly also buying, supporting the stocks, supporting the company, buying shares. And they strongly believe in the underlying values, strongly believe in the story we have. So we continue. We have a very, very close and good dialogue with our owners, and especially then the larger owner. And believe me, they want to make money. They want to increase the value of the company. And of course, if there are not good enough opportunities, they will figure out other ways of increasing the value, like the buyback or other ways to give this money and give this value back to the shareholders.

Thank you for that. And now I'm going to be a little bit technical and I would expose my ignorance here because I would just read the question. But so the questions are around Papatera here. And basically 15,000 in production with 100,000 expected. Could you elaborate a little bit on that? And what shall we expect going forward?

Yeah, then I think I will correct your question because I think it's not only about Papatera. Papatera alone will not bring Brava to 100,000 barrels. That's a combination of Atlanta getting new wells on stream, which is extremely important, and also the rest of the portfolio where you also have new investments, and of course getting the last -5,000 barrels on stream from Papatera. Now it's more, 8,000 barrels from Papatera that also come on stream. So, yes, I am very confident that these 100,000 barrels is within reach and actually, I shouldn't say with a good margin, but I think it's actually something we think is a bit conservative. With the delays and so on, but the reservoir is very good in both Atlanta and Papatera. And I keep on repeating, if the oil is in the reservoirs, it's going to come out. And we have the two platforms basically up and running. It's a brand new platform in Atlanta. And I don't expect any challenges on getting the hookup and commissioning for the next four wells. And I'm also very confident that we will see Papatera, which is in a very different shape. But again, I've been there myself. I've seen the FSO. I actually am very confident on the improvements that they have been able to do, the years they have operated. So, yes, I do believe that 100,000 barrels will happen within this year.

Okay, thank you for that. And now a couple of questions around Venezuela. Obviously, there's a lot of questions coming in here where the questionnaire doubt that there will be any production in Venezuela. And obviously, there will be different views here. But if I may start by asking you a question that I believe I asked you the last time, is that when you invest in Venezuela, you are, as I understand it, on sort of first step, second step and third step. And what I'm driving at here would be, what is the sunk cost so far? And obviously, you're planning on investment, but you haven't really committed yet because you're waiting for the approval. Is that a correct statement from my part?

Yeah, and it wasn't a question about how much is sunk cost. Yes, that sunk cost is everything we have spent so far. Will there be production in Venezuela? Of course, there will be production in Venezuela. But I think the question, Mark, is really today, is linked to when the US administration, or what will be the policy at the end of the day from the US administration. I think that's the only... Believe me, I see a lot of... There's a lot of work to be done here. There's a lot of things I have to agree with PDVSA about. But the fact that we now have a business plan, that we now have agreed upon what needs to be done, and I see full commitment from the PDVSA people in Pedrera Neta, and they are basically, you know, eagerly waiting us to get started together. So we have very strong support. Otherwise, it would be impossible to do this in six, seven weeks, as we have done with the Meza Tecnica. So, yes, there will be production. I think it's up to the US administration to know exactly when it's going to start up.

And if we look at the share price, then it's my understanding that the market hasn't really fully incorporated any major value from Venezuela. And that's why I think it could be interesting to just do the expectations of future investments that has not been done yet. If we look forward, then, obviously, you're not really in the driving seat when it comes to the administration in the US. But what shall we expect? What's the timeline when it comes to, let's say, the Venezuelan authorities?

OK, OK, OK, yeah. So what's the timeline for the four hour? No, I'm very confident that by the end of April, May, that we will have the terms agreed upon with how to operate and what kind of regime we're operating in. We have been very clear about our expectations. And, yeah, I think it's going to be interesting That's my expectation, really. But I think it's... I think that's a realistic expectation based on the experience we have seen. But by all means, things could take more time. It's not easy to cover. But that's our plan, at least. That's what we think.

So basically, there will be, let's say, in the coming quarter, there will be more clarity. And perhaps there will be more clarity from both administrations and both jurisdictions. So would it be fair to say that the next news flow, which you can control, would be, let's say, Papatera and Venezuela with the local authorities? Or is there anything else we should be looking out for that would be in your control? I

think, actually, the connection of the new wells in Atlanta is very material. Even more material than I think the Papatera issue is. But those two things will add significant production to BRAVA. There are some initiatives that you talked about to highlight the portfolio or something. I'm not so occupied with these processes. But that could be something that... There are some initiatives to look at selling larger parts of the onshore and even looking at some of the offshore things. But I think the best thing for me is just to keep... My colleagues, so to speak, in BRAVA, keep focus on delivering barrels and get these wells connected. And the cash flow will convince everybody about the value in the company.

Right. So I thank you for that and pressed for time. I think we will forward all other questions to your web page and to yourself and to the rest of the management. So with that, Kjettil and Roberto, thank you so much.

Thank you for leading this once again. Always a pleasure to start talking with you.

So we'll see you later and take care. And to all of you out there asking the questions, if you haven't got your questions answered, please forward those to Maha Energy and we'll see you later. Thank you.